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German business morale slips ahead of ‘difficult winter’

Business confidence in Germany weakened again in October, a key survey said Tuesday, as the country hurtles towards a recession on the back of high inflation and a raging energy crisis.

The Ifo institute’s monthly confidence barometer, based on a survey of about 9,000 companies, fell for a fifth consecutive month to reach 84.3 points, down from 84.4 points in September.

The business mood “continues to be grim”, Ifo president Clemens Fuest said in a statement. “The German economy is facing a difficult winter.”

German inflation hit a record of 10 percent in September, fuelled by higher energy prices after Russia halted gas flows through the crucial Nord Stream 1 pipeline amid tensions over the war in Ukraine.

The German government now expects Europe’s biggest economy to shrink by 0.4 percent in 2023, and the Ifo survey is the latest in a series of economic indicators showing a gloomy outlook.

“Companies and households are increasingly suffering under higher energy invoices and ongoing high inflation, adjusting consumption and investments,” said ING economist Carsten Brzeski.

“There is very little evidence that the German economy can avoid recession,” he added.